Environmental tax shifting cannot replace regulation

New CCPA report offers a framework for evaluating environmental taxes and cautions against using tax shifting as a panacea

October 26, 2000

(Vancouver) The BC office of the Canadian Centre for Policy Alternatives released a report today that evaluates a new policy tool's ability to protect our environment. Shifting Ground: A CCPA-BC Policy Brief on the Potential and Limitations of Environmental Tax Shifting finds that tax shifting is a good idea in principle, but should be applied with care and should not used as a replacement for environmental regulations.

The BC government recently released a discussion paper on environmental tax shifting. Today's brief is intended to contribute to the emerging debate on ecological taxes.

Dale Marshall, resource policy analyst with the Centre and author of the report, states that many environmental laws and policies cannot be replaced by tax shifting. "The BC government has rolled back some environmental regulations, has cut the Ministry of the Environment's ability to monitor and enforce regulations, and appears to be moving towards energy deregulation," says Marshall. "Environmental tax shifting can play a useful role in some circumstances, but it is simply not capable of filling the void left by this regulatory retreat."

The report lays out a framework for determining when the use of environmental tax shifting is appropriate. "The principle of making individuals and companies pay the true cost--including environmental and social costs--of their activities is a good one," says Marshall. "However, when trying to solve environmental problems, it is important to consider the full range of policy instruments. Sometimes, using regulatory and economic instruments in conjunction allows society to benefit from the advantages of both," says Marshall.

The report puts forward criteria to consider when choosing between environmental policies. They include ecological benefit, equity, ease of administration, and political feasibility. "Based on these criteria, there are definitely opportunities for using environmental tax shifting at all levels of government," states Marshall.

The study also suggests that unintended consequences--greater income inequality, loss of jobs, and loss of competitiveness--need to be addressed whenever new policies are put into place. "It's important that we don't leave anybody behind as we strive for a more sustainable society. Environmental taxes must be constructed in such a way that inequality is not made worse," says Marshall.

Finally, the brief offers a case test of how a carbon tax--aimed at reducing greenhouse gas emissions--can be constructed in a way that mitigates job losses and ensures lower-income people do not carry a heavier burden.